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1. Krystal is a U.S.-based company that manufactures, sells, and installs water purification equipment. On April 11, the company sold a system to the City of Nagasaki, Japan, for installation in Nagasaki's famous Glover Gardens. The sale was priced in yen at 25,000,000, with payment due in three months. The exchange rate and interest rate data are shown in the following tables:

Spot exchange rate: 117.974/$

1-month forward rate: 117.505/$

3-month forward: 116.610/$

Money Rates United States Japan

One month 4.9125% 0.09500%

Three months 5.0000% 0.09500%

Krystal can be borrowing yen from Japanese banks at a spread of two percentage points above the Japanese money rate. Krystal's weighted average cost of capital is 15%, and the company wishes to protect the dollar value of this receivable.